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Cotton comeback Gin Show topic

Elton Robinson, Farm Press Editorial Staff | Feb 11, 2010

A steady rise in cotton prices combined with declining corn and soybean prices has changed the relationship between the commodities enough that cotton is back in the conversation for an acreage increase in the Mid-South this coming year.

Market analyst Richard Brock will discuss this potential change in the crop mix Saturday, Feb. 27, 8:30 a.m., at the 2010 Mid-South Farm and Gin Show at the Cook Convention Center in downtown Memphis. The gin show runs Feb. 26-27.

“We’ll talk about the trade-off between soybeans, corn and cotton this coming year,” Brock said. “Cotton profitability has improved quite a bit. We have a lot of clients in the South who want to go back to cotton this spring.”

The optimism on cotton is finally rooted in fundamentals and not funds (at least not at the time of this writing). And that’s a good thing.

“We’ve reached a level of production to where we’ve stabilized the supplies and are actually starting to draw down our supplies in the United States,” Brock said. “We will probably see more cotton, although most of these markets look like they’ve topped in the last few weeks.”

Brock sees most of the pricing opportunities for cotton coming “before we get into the field to plant the crop. The timeliness of discussing that at the Gin Show is going to be good.”

Brock notes that other factors such as farmland prices, interest rates and the economy will also impact the cropping decision this spring. For example, whether or not the economy is headed toward inflation or deflation can have an impact on input prices.

“It’s as important to talk about input prices as it is to talk about the relationship between corn, cotton and soybean prices,” Brock said. “Input prices can fluctuate just as much, with the energy and fertilizer markets.”

Brock will also discuss changes in marketing strategies used by farmers. “Farmers are shifting the burden over to their grain merchandisers, who are using more hedge-to-arrive contracts. These are the same as futures contracts, except you have a party between to meet the margin money. We’re seeing more of that.

“We’re also seeing more and more going into pools and professional marketing management, rather than shooting from the hip which is more common in the Midwest.”

Brock holds 40 to 50 seminars annually for soybean, cotton, corn and wheat farmers. Over the last few years, he has seen a large surge in Mid-South farmers interested in grain marketing advice. Why? “First of all, many farmers are raising corn when they haven’t traditionally raised corn. Secondly, many of them are cotton producers who traditionally have someone else do the marketing.”

Brock regularly writes a column for Delta Farm Press, and also writes a newsletter on the markets. His firm’s services range from advising farmers to managing a grower’s entire marketing program.